After many ups and downs during the session, Wall Street finally manages to remain in balance. The S&P 500 fell -0.07% to 4,780 pts. The Dow Jones gained +0.04% to 37,711 pts. The Nasdaq is stable, at 14,970 pts. Operators were cautious, after learning of mixed US inflation figures, and awaiting quarterly bank publications.
Highly anticipated, the American inflation figures for the month of December are somewhat disappointing. Thus, today’s report highlights a consumer price index increasing by +0.3% compared to the previous month (+0.2% market consensus). Over one year, this indicator increased by +3.4% (+3.2% consensus). Excluding food and energy, the December CPI increased by +0.3% compared to the previous month, in line with market expectations, and by +3.9% year-on-year. A month earlier, the CPI had increased by +0.1% compared to the previous month and by +3.1% year-on-year (+0.3% and +4% excluding food and energy).
Unemployment claims fell slightly last week in the United States. The US Department of Labor announced for the week ending January 6, unemployment claims numbering 202,000, down 1,000 compared to the previous week. The consensus was positioned at 210,000. The 4-week average stands at 207,750, down 250. Finally, the number of unemployed workers receiving compensation for the week ended December 30 stands at 1.834 million, down 34,000 over seven days (1.871 million consensus).
John Williams, head of the New York Fed, indicated on Wednesday evening that rates were expected to remain at a high level for some time. He added that the central bank’s work to bring inflation back towards the 2% target was not yet complete, although the current level of rates would appear sufficiently restrictive. The Fed could begin to reduce its rates when it has confidence in this return of inflation to 2%, but there is still a way to go according to the official. Monetary policy therefore remains dependent on data. Finally, the leader was doubtful regarding a possible reduction in the pace of QT (quantitative monetary tightening, or reduction of the Fed’s balance sheet). He considers the liquidity sufficient on the markets, but also specifies that the Fed will have to think this year about the outcome of the quantitative tightening program.
Oil rose quickly, supported by high tensions in the Middle East. The situation has become tense, reinforced by Tehran’s seizure of an oil tanker off the coast of Oman. The boat, previously seized by the United States for transporting Iranian oil, was captured by Tehran off the coast of Oman, intensifying tensions on the world’s most important trade route for global crude supplies. Thus, a barrel of WTI crude rose +1.78% to $72.65.
The dollar is fairly stable against the euro, at 0.9112 euros.
An ounce of gold returns -0.08%, returning to $2,028. Bitcoin lost -1.17% to $46,400.
Tomorrow Friday, markets will follow the producer price index and a speech from Neel Kashkari of the Fed.
On the business side, banks and financial institutions will kick off the 4th quarter results season. UnitedHealth, JP Morgan Chase, Bank of America, Wells Fargo, BlackRock, Citigroup and Bank of New York Mellon will reveal their accounts before the market. Delta Air Lines will also release tomorrow.
Values
* Infosys (+3.92% to $18.8). The Indian digital services and consulting giant, listed on Wall Street, announced third fiscal quarter profits lower than expectations. The group has also adjusted its annual revenue forecasts due to weak customer demand. Consolidated quarterly net profit fell -7% year-on-year to 61.1 billion rupees, approximately $735 million. The market consensus was at 61.7 billion rupees. The group is adjusting its annual revenue forecasts for the third time, but this time it is a tightening of the guidance. Infosys is now looking at annual growth of 1.5-2% at constant currencies (1-2.5% previously). For the 3rd quarter, revenue increased to Rs 388.2 billion.
* Netflix (+2.91% to $492.23), the American colossus of video streaming, would have exceeded 23 million monthly active users on its advertising-financed subscriptions, indicates Variety, which quotes the advertising director Amy Reinhard. The latter spoke at the ‘Variety Entertainment Summit’, as part of the CES 2024 show in Las Vegas. The article compares the numbers to an October letter to shareholders in which Netflix said its ad-supported offerings had more than 15 million monthly active users worldwide.
* Microsoft (+0.49% to $384.63). Microsoft-backed ChatGPT creator OpenAI is reportedly in talks with CNN, Fox Corporation and Time to enter into licensing deals. This is what Bloomberg reports, citing people familiar with the situation. Thus, the artificial intelligence startup is continuing its efforts to secure access to content allowing it to train its AI tools, while accusations of copyright infringement are increasing.
* Hertz Global Holdings (-4.28% to $8.95). The American car rental group will sell around 20,000 electric vehicles from its American fleet, or around a third of its overall EV fleet. The group intends to reinvest part of the proceeds from the sale of EVs by purchasing gasoline vehicles in order to meet customer demand, according to a regulatory notice. It has in fact observed low demand for the rental of its electric vehicles. The sales would represent a depreciation of approximately $245 million in the 4th quarter of 2023. The measures should improve adjusted corporate Ebitda this year, but they will weigh on the 4th quarter of 2023…
Collision and damage costs for electric vehicles remained high in the 4th quarter, the group said. The depreciation charges announced for Q4 are in addition to those of depreciation that the group plans to record during the quarter as part of the normal management of its fleet. Hertz will continue to offer EVs, but will implement measures to increase profitability, developing infrastructure such as charging stations and strengthening relationships with vehicle manufacturers.
* Tesla (-2.87% to $227.22). The Texan electric automobile giant informed its American employees active in production that they were going to obtain salary increases, indicates Bloomberg. Handlers, production associates and quality inspectors would thus benefit from a salary increase “adapted to the market”, according to Bloomberg, which takes information from a prospectus displayed in Tesla’s facilities in Fremont.
* Citigroup (-1.77% to $52.08). The group indicated that its 4th quarter results would be affected by more than $3 billion in non-recurring items, reserves and charges, including notably $1.3 billion in provisions for currency exposure in Argentina and Russia. The bank will also record a charge of $1.7 billion to pay a special assessment to the Federal Deposit Insurance Corporation, the bank deposit guarantee body. In total, the combined charges and provisions will weigh on quarterly results by nearly $3.8 billion.
* KB Home (-1.23% to $62.42). The American real estate developer published adjusted earnings per share of $1.85 for its fourth quarter, compared to a consensus of $1.69 and a level of $2.47 a year earlier. Revenues totaled $1.67 billion in the quarter ended in November, beating consensus by 4%, while they stood at $1.94 billion for the comparable period last year. Thus, the group shows a drop in revenues, while the average selling price fell to $487,300 ($510,400 a year before). Nevertheless, housing deliveries, numbering 3,407, exceed expectations, and the group anticipates a recovery in demand.
Net orders for Q4 increased…176%, and net order value increased 157% to $932.6M. These increases reflect improved demand and a lower cancellation rate compared to the prior year quarter. Gross orders for the quarter increased +23% to 2,667, and the cancellation rate as a percentage of gross orders improved to 28%, from 68%.
* Google (Alphabet -0.14% to $142.08) is cutting hundreds of positions working in particular on its digital assistant, in hardware or engineering, indicates Bloomberg. The group is continuing its cost reduction initiatives, with affected employees working in particular on Google Assistant or within the hardware team dedicated to augmented reality. Employees of the central engineering organization would also be hit. “Throughout the second half of 2023, some of our teams made changes to become more efficient and work better, and to align their resources with their highest product priorities,” Google said. “Some teams continue to make these types of organizational changes, which include some role reductions on a global scale,” adds a spokesperson for the group cited by Bloomberg. Recall that about a year ago, parent company Alphabet announced its intention to cut around 12,000 jobs, or more than 6% of its workforce.
